As we have been stating since March 2009 , we see no viable outcome for the market other than a long term "recovery", meaning in this instance that the market must break new highs in order to prevent a complete meltdown of the "economy". We correctly have been stating since August of 2011 during the retrace that we expected a new intermediate high in 2012 and that is what has occurred in the last few days.
Normal market activity would be a price above the top of the Short entry range, a pullback, and then a resumption of the upward trend before an all-time high is reached. Any negative or positive news from FED of ECB will of course have an outsize effect on price action from this point forward. As would other fundamental factors not now known.
If the LT Swing Short is definitively broken, frenzied short covering could propel this market to the identified 2nd target area very quickly, perhaps in as little as 2 days. Conversely a prolonged struggle over this area could result from a lack of sufficient catalyst if determined short sellers reenter at this price level.
We reiterate that at this point we see nothing from a technical standpoint to preclude a new all-time high, possibly before March 2013 . Don't underestimate the election cycle effect, for good or bad.
As always, all personal views aside, we trade what we see on the chart, not what we wish. Charts don't lie.
Our analysis and experience shows conclusively that market reaction to the 2nd target is always the most important level to consider, on all time frames. That is what we refer to as the "market target" as opposed to an intermediate profit-taking target along the way.
Generally speaking, we expect a pullback after the 2nd target is reached, but that depends on various factors. The longer the time-frame of the analysis, the longer a reaction or lack thereof may take.
We have pullback targets identified as well as the next target in trend if the 2nd target is reached. We will look for an opportunity to post our analysis regarding them next week.